Growth in loans to the private sector has kept up a steady pace in July. According to the latest RBA figures, private sector credit grew by 0.5%, down from June’s figure of 0.6% and in line with the market consensus figure. The year-to-July growth rate of 5.3% was slightly lower than June’s comparable figure of 5.3%.
The increase was driven by owner-occupier loans, which increased by 0.5% over the month, as did business credit. These two types of lending account for most loans by value and thus any change in them has a greater effect in overall credit growth.
Westpac senior economist Andrew Hanlan said some types of lending would ultimately slow. “Housing credit growth is likely to slow in response to the recent tightening of lending standards and out of cycle interest rate rises by commercial banks. As well, the boost from RBA rate cuts in May and August 2016 has faded. That said, more generous state government first home buyer initiatives, in effect from July, will provide a partial offset.
Growth in investor loans was steady at 0.4%. On an annual basis, this segment of private credit grew by 7.4%, which kept it at the same rate as in May and June. Both APRA and the RBA would be more than a little concerned if it were to grow at a faster rate than this. While the growth rate of lending to investors has been stable for the last few months, in July it was still the highest rate of all four of the different types of lending, so its share of the total market has been increasing (see diagram below).
